Organisations that use loan funding to develop social enterprise grow faster than organisations financed through traditional grant-giving, according to an independent report into the effectiveness of the Adventure Capital Fund.
The fund, which is run by the same organisation as government-backed loan scheme Futurebuilders England, offers loans, grants and business support to community enterprises.
The report found that its investees' income had grown by 160 per cent over six years, compared with an average of 19 per cent for other similar-sized charities.
Stephen Thake, author of the report and a reader in urban policy at London Metropolitan University, said this showed the need for more loan funding to support sustainable social enterprises.
"These findings show that by engaging in social enterprise, community-based organisations can become more sustainable," he said.
However, he said that many organisations backed by the ACF had encountered financial difficulties along the way because of changes in Government funding.
Thake said that community organisations were suffering because of a move away from local contracts towards regional and sub-regional procurement.
"If the ACF model is to achieve its full potential, there needs to be a better match between the long term commitments that community-based organisations are asked to take on and their ability to secure adequate revenue streams," he said.